Monday, October 26, 2009

Triangle Invalidated - Watching Now for the 1050 S&P Cash

The Dow rallied about 100 points early this morning before falling off a cliff later on now down over 100 points (that's a 200 point reversal in less than an hour). The action the past few days shows the bulls are exhausted and the bears are now taking over. The S&P followed suit with the Dow and broke the triangle's key level 1077 in the S&P cash index which invalidates the bullish triangle scenario. The bears have full control right now, and the US dollar is rallying strongly at the moment, so a stock market top and crash scenario is back on track as a possibility, but not confirmed. The next target for the S&P is a solid break and close beneath to further add evidence to the crash being udnerway is the ascending trendline holding the market up since the March of 2009 lows, which now is at about the 1050 level right now.

Although the crash scenario is not confirmed, with the only short term bullish count erased now, the evidence points towards lower levels at least in the near term as we wait to see the market's reaction to testing the ascending trendline near 1050.

My positions now are holding long dated put options (2011) on the SPY, QQQQ, IWM, XLF and SLV, and I'm long the US dollar throught the USD/CHF and I'm short the EUR/GBP.

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